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Schedule C is the way I'm handling it now. It seems to fall under the category of Inventory carried forward. But I didn't book it as inventory in previous years. I did file a Sched C on it for 2009, though. I only accounted for rental income vs. that year's expenses, such as upgrades for the rental market, repairs, maintenance and storage.
What I'm proposing to do is show it as inventory for the first time in 2010, with an explanation as to why I didn't in previous years. That is, I wasn't aware I should do that. Then I'll tally up the original purchase price, the repairs put into it from 2008-2010, minus the repairs and maintenance already accounted for on the 2009 Schd C. Then I'll show the 2010 sale price as Income. And write off the net loss against my net income from my other more lucrative business.
Sound like an acceptable approach?
OK, thanks for the advice. I'll nix the explanation.